William andrew kopwe the open university of tanzania

4.2.5 Islamic Banking

Sharī’a implementation and its movement from the private sphere of the Muslims’ life to the public sphere also have to do with the issue of Islamic banking in the Country. Admittedly, the economical and financial aspects of Sharī’a are too wide to discuss in this short subtopic. In this part, the researcher explains the major features of Islamic banking for the sake of understanding the debate behind it. Islamic banking is a system of banking or banking activity, which is consistent with the principles of Islamic law (Sharī’a). As mentioned earlier in this study such matters are dealt with by the branch of Sharī’a known as fiq muamalat (Islamic rules of transactions). ⁵⁸ Among many features of fiq muamalat, two are important for our study. The first one is the prohibition of rib§ (interest) which requires that the bank does not take interest from the client and the client does not receive interest from the bank. The second one is that the “investments made under Islamic Banking are never associated with the traditional ‘sin’ industries such as alcohol, tobacco, gambling or pornography.”⁵⁹
According to Sharī’a, money is not considered as a commodity, but a medium of exchange. Therefore, one cannot trade on the medium of exchange. This being the case, Sharī’a banking does not give loans to people in terms of money. It uses a system known as asset financing whereby people are given loans in terms of commodities. That means when a person applies for a loan for business the bank will buy commodities and give them to the people. This also helps to ensure that the business done by the applicant is not among the forbidden businesses.⁶⁰
As Islamic banking is part of Sharī’a implementation, its introduction is an initial stage in gearing towards the implementation of the full fledged Sharī’a aspect of economic and financial rules in the Country. Juma Leli comments:

The Islamic financial system is formed by interrelated components, among others, Islamic banking, Islamic capital market, Islamic money market and Islamic insurance. Experience shows that, the development of an Islamic banking system is the initial stage in the development of an Islamic financial system. Most of the countries in East Africa including Tanzania are in this initial stage of the development of Islamic financial system⁶¹.

Hailing the advantage of the banking system, the Tanzanian Grand Mufti said that the “introduction of Islamic Banking was a relief for the Muslim community as they have for long suffered from high interest rates.” He was quoted saying that, “The Almighty God forbids charging of interests. He destroys any economy that depends on interests and blesses offerings.” For him interests in finance were the reason for the collapse of the world markets, and subsequently, followed by world economic crisis. The Mufti said, as a leader of the Muslim Council of Tanzania (BAKWATA), he would launch a special facility within the NBC Islamic Banking machinery that would enable Muslims to put their savings to accumulate money for the annual Holy pilgrimage of Hajj.⁶² The official who works at the Sharī’a window of the National Bank of Commerce in Tanga comments as follows:

The banking system has a lot of benefits from which even non-Muslims may benefit as well. The most important one is that the bank does not charge Rib§. Rib§ is forbidden even in the Bible. Also when you open an account in Sharī’a banking, you will contribute Tsh. 200/ monthly. This money is used for the Muslim insurance which is known as Taqaf alwaqfat. If the account holder dies his or her family will be given Tsh. 500,000/ as a condolence from Taqaf alwaqfat. Also from the Tsh. 200/ contribution some money is used to help orphans and poor people. This is a great opportunity for a person to help the need which in turn he will receive Thawab (reward) from God. Here in Tanga the system has been accepted by people and even non-Muslims have opened accounts because they know they will benefit from that. People do not care about the name of the bank. They care about the benefit they get.⁶³

This is to say that Islamic banking in the Country gives an opportunity for Muslims to fulfill some of their duties like helping the needy. The official goes further by saying that NBC has branches in South Africa where Muslims are only 2% of the population. But Sharī’a banking has clients. Out of all the clients in South Africa 37% of the clients are non-Muslims. He says even Pope Benedict (XVI) supports Islamic banking system as an alternative to the conventional banking which has rendered many poor because of its capitalistic character in rib§ (interest).
The churches in the Country have not given their stance following the introduction of Sharī’a banking in the Country. The major reason here is that the banking system has not touched the Government. It is done in the business ground. Banks are non-Governmental institutions though the Government holds shares in some banks like National Bank of Commerce.⁶⁴ The Islamic banking system is used by the bank companies as a way of attracting more customers in the Country. “If you introduce anything which touches people’s religious faith you may attract them not because they benefit economically, but because of the feelings that they are doing something religiously right.”⁶⁵ According to this view the introduction of this Sharī’a banking is a way of manipulating religious feelings for one’s own benefit.
But Christians from different denominations have not been comfortable with the move of introducing the Sharī’a banking system. The major issue in this is that if this is the initial stage toward the implementation of total Sharī’a, then Islamic banking is a way of bringing Sharī’a implementation to the public sphere of the Country which will soon or later affect all citizens.⁶⁶ Telephone correspondence with the General Secretary of one of the Lutheran Dioceses in the Country revealed that many Christians are quiet about the banks because they are not conversant with the idea and its effects. However, he is skeptical of the introduction of the system. He says that banks are public services which are not supposed to be offered along religious lines. Even if the services are not limited to Muslims only, the name of the banking is religiously discriminating because it shows that it is an Islamic banking. This makes non-Muslims to hesitate to join. Furthermore, since this bank does not take or give interest, this will weaken the nation’s economy because if many people join the Islamic banking the nation will miss a lot of money which would have been gotten from the interest. Therefore, this will affect not only the non-Muslims but also Muslims who also depend upon the Government for social services. Or rather those who are not in the Sharī’a banking will be over tasked in order for the banks to be able to run their activities.⁶⁷
On the other hand, there are those Christians who feel that that Islamic banking system does not have any negative impact on the affairs of Christians in the Country. These people take the Sharī’a banking as a private thing. Since the bank system does not force other people to use the Islamic way of banking, it should not be taken as an introduction of Sharī’a to the public domain of the Country. In an email correspondence, a Christian scholar made a comparison of the strictness of the banking on investing in some businesses which are considered sinful with the way the Evangelical Lutheran Church in Tanzania does. He comments that, “even us [Lutherans] we do the same-the ELCT does not buy shares in some companies like Tanzania Breweries limited or Tanzania Cigarette Company.” ⁶⁸
So far Sharī’a banking is not fully fledged in Tanzania. Two banking companies have introduced windows of Sharī’a banking in some of their branches. These are the National Bank of Commerce and the Stanbic Bank. Since this is more of business issues, it was not possible to get the exact number of people who have joined Sharī’a banking. The only reliable information is from the Bank officials who assert that “there is good progress because both Muslims and non-Muslims in the Country are opening accounts in the Sharī’a window of the NBC.” ⁶⁹
However Sharī’a banking is facing some legal and technical challenges in the Country as outlined by the Deputy Governor of the Bank of Tanzania as:

The first is the need for supervisory authorities to ensure that the Islamic financial system is fully integrated with the rest of the financial system. The integration process not only entail allowing Islamic institutions to operate, but also providing a comprehensive legal and regulatory framework, as well as developing a supportive financial infrastructure. Secondly, the need to conduct studies to capture different types of risks associated with Islamic finance and the design of appropriate risk mitigation and consumer protection frameworks. Thirdly, the need for developing an Islamic Financial System institutional and organization structure comprising of Management Committee, Board Committee and Sharia Advisory Committee which is consistent with acceptable corporate governance standards and practices. Fourthly, the requirement for Institutions that offers Islamic products to develop sharia compliant products those are acceptable within the legal and regulatory framework. Fifthly, the review and assessment as to whether the existing infrastructures such as deposit insurance schemes, Government securities, inter-bank money market and the function of central banks as lenders of last resort, fit well in the Islamic finance and Islamic banking framework.⁷⁰

Adding to the above challenges, some Christians think that the introduction of the Sharī’a banking system may not have much patronage because if Muslims could not be able to fulfill their Sharī’a in other activities, very few of them will opt for this banking system in the Country. “Since Muslims deposit their money in the banks in order to get interest, I am very sure that Sharī’a banking will get very few clients whom of course to them everything is looked with a fundamentalist eye.”⁷¹ This view is in consonance with the challenges facing Sharī’a implementation in the Country, a topic which is discussed in the next chapter.